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Big tax increases on imported food items, including milk powder
The Government is to increase import duty and cess on several imported food items which an official describes as ‘semi luxury food items’.This plan to be introduced in the November Budget is to increase revenue from these items by 30 per cent to more than Rs. 60 billion next year from an estimated Rs. 46 billion this year.
The percentage of increase on food and beverage items such as canned fish, fruit juices, beer, foreign liquor, sausages and similar products and processed foods such as meat, milk powder, butter cheese, cereal, and chocolate, is yet to be finalised, an official said. Revenue from import duties last year increased by only 3.7 per cent to Rs. 83.1 billion due to lower import duties and exemptions granted to selected items last year, according to the Central Bank’s 2013 annual report.
Although the Government’s aim was to curtail food imports, a record US$ 135.6 million (Rs. 17,628 million) was spent to import food items in June this year. This was an increase of 12.3 per cent in dollar terms compared to food imports amounting to $120.8 million (Rs.15.100 million) in June 2013, according to Finance Ministry figures.
The official said this was far more than the targeted limit of $84 million a month for imports (which amounts to $1 billion annually).
The imposition of taxes on basic food items has resulted in a heavy burden on the poor and this burden should be shifted onto the rich. This is the rationale in increasing taxes on luxury food items and also to promote more locally produced food, the official said. The local economy could replace food imports altogether and a huge value added food industry could be developed, if most of these foreign food products were produced in Sri Lanka, he said.